July 1, 2013 9:17 pm

Growth of handheld computers hits economic argument for HS2

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Anti-HS2 protesters reject the business case for the line©Charlie Bibby

Anti-HS2 protesters reject the business case for the line

The economic benefits of the High Speed 2 rail link will probably be revised downwards as the transport department drops an assumption that business people are unable to work on trains.

The news comes just days after the cost of the scheme was increased nearly a quarter to £42.6bn, or £50bn including trains, raising new doubts about its viability.

The cost-benefit analysis for the rail scheme assumes that faster trains will produce £21bn of economic benefits simply because passengers will spend less unproductive time.

Philip Rutnam, permanent secretary at the Department for Transport, admitted that the modelling was based on a survey that was now “a decade old” – before the era of handheld devices.

A report for the DfT in 2009 found train journeys had become much more productive. “The obvious causes of this trend are in the general availability and use of mobile phones and laptop computers,” it said.

Yet the HS2 analysis has not taken this change into account. “We are seeking to revise that,” Mr Rutnam told the public accounts committee of MPs, revealing that an altered business case would be published in the autumn.

Margaret Hodge, who chairs the committee, said it had been difficult to work on a train 10 years ago – while nowadays it was “gloriously” easy thanks to technology. “You put a very high value on business travellers, if that was to come down you’d find this project was not worth pursuing at least on a cost-benefit analysis,” she said.

Amyas Morse, head of the National Audit Office, also told Mr Rutnam that by assuming that business travellers did not work on trains it had injected “optimism bias” into its calculations.

Hilary Wharf, director of the HS2 Action Alliance, said £21bn of the £48bn of forecast economic benefits from HS2 depended on the assumption that people did not work on trains. “By 2026 when HS2 begins, mobile technology will have taken greater leaps forward, making the old position obsolete,” she said.

Ministers are pushing ahead with HS2 in the belief that the new Y-shaped line from London to Manchester and Leeds – with a first phase to Birmingham – will help the economy of the north and ease congestion across the rail network.

Mr Rutnam said it would not be long before travellers at southern stations on the West Coast main line would be unable to board trains into London because of overcrowding. “The network will not cope if that growth, or anything like it, continues,” he told MPs.

A train passes beneath a HS2 protest sign©Reuters

A train passes beneath a HS2 protest sign

The permanent secretary, asked to explain last week’s dramatic revision of HS2’s costs, said an earlier £34.5bn price tag had been a “high level desk-based exercise” rather than a final estimate.

That prompted Chris Heaton-Harris, a Conservative backbencher, to ask whether the public consultation had been flawed.

“Was it a fair consultation?” he asked. “Were you selling something for which the price tag has just gone up?”

Ministers admitted last week that the costs were higher largely because of changes that aim to minimise disruption and environmental impact, including tunnelling in west London and near Birmingham. The DfT had already been forced to admit a cost increase of £2bn for HS2at the start of the year.

“Everyone thinks it’s going to be £70bn, £80bn or £100bn by the time it’s finished. That’s par for the course, judging by your record,” said Richard Bacon, a Tory committee member.

Austin Mitchell, a Labour MP, said the £14.4bn of contingency built into the overall price suggested that the cost estimates were “shaky and flimsy”.

Mr Rutnam conceded that there were valid doubts over the timescale of HS2, with a hybrid bill set to be finished by 2015. That legislation is needed before work starting the following year. Completion of the first phase is pencilled in for 2026.

Challenged by Ms Hodge as to whether that target was too ambitious – or, in her words, “mad” – the civil servant replied that it was “not wholly unrealistic” but also “challenging.”


Letter in response to this report:

Economic prosperity is just one of many values to measure / From Mr Keith Morton

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